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Sharing the burden: monetary and fiscal responses to a world liquidity trap

Cook, David; Devereux, Michael B. - Federal Reserve Bank of Dallas - 2011

interest rates" to fall below zero in all countries, giving rise to a global "liquidity trap." This paper explores the optimal …. ; The key feature of demand shocks in a liquidity trap is that relative prices respond perversely. A negative shock causes … response to conditions generating a global liquidity trap, there is a critical mutual interaction between monetary and fiscal …

Persistent link: https://www.econbiz.de/10009292929

Some alternative perspectives on macroeconomic theory and some policy implications

White, William R. - Federal Reserve Bank of Dallas - 2010

The macroeconomic theories and models favoured by academics, as well as those used more commonly by policymakers, effectively rule out by assumption economic and financial crises of the sort we are living through. In particular, the longer run dangers posed by the rapid expansion of credit and...

Persistent link: https://www.econbiz.de/10008598684

The fiscal multiplier and spillover in a global liquidity trap

Fujiwara, Ippei; Ueda, Kozo - Federal Reserve Bank of Dallas - 2010

liquidity trap. Using an optimizing two-country sticky price model, we show that the fiscal multiplier and spillover are …

Persistent link: https://www.econbiz.de/10008465683

Fiscal deficits, debt, and monetary policy in a liquidity trap

Devereux, Michael B. - Federal Reserve Bank of Dallas - 2010

interest rates. Given that the liquidity trap is generated by a large increase in the desire to save on the part of the private … financed by deficits may be far more expansionary than that financed by tax increases in such an environment. In a liquidity …

Persistent link: https://www.econbiz.de/10008475891

Insulation impossible: fiscal spillovers in a monetary union

Cooper, Russell; Kempf, Hubert; Peled, Dan - Federal Reserve Bank of Dallas - 2009

This paper studies the effects of monetary policy rules in a monetary union. The focus of the analysis is on the interaction between the fiscal policy of member countries (regions) and the central monetary authority. When capital markets are integrated, the fiscal policy of one country will...

Persistent link: https://www.econbiz.de/10005009937

Fiscal stabilization with partial exchange rate pass-through

Kersting, Erasmus K. - Federal Reserve Bank of Dallas - 2009

This paper examines the role of fiscal stabilization policy in a two-country framework that allows for a general degree of exchange rate pass-through. I derive analytical solutions for optimal monetary and fiscal policy which are shown to depend on the degree of pass-through. In the case of...

Persistent link: https://www.econbiz.de/10005009940

Do good institutions promote counter-cyclical macroeconomic policies?

Calderón, César; Duncan, Roberto; Schmidt-Hebbel, Klaus - Federal Reserve Bank of Dallas - 2012

The literature has argued that developing countries are unable to adopt counter-cyclical monetary and fiscal policies due to financial imperfections and unfavorable politicaleconomy conditions. Using a world sample of 115 industrial and developing countries for 1984-2008, we find that the level...

Persistent link: https://www.econbiz.de/10011026846

Export shocks and the zero bound trap

Fujiwara, Ippei - Federal Reserve Bank of Dallas - 2010

bound is not a binding constraint. This could be one possible explanation as to why a country like Japan experienced much …

Persistent link: https://www.econbiz.de/10008690997

How does government spending stimulate consumption?

Murphy, Daniel P. - Federal Reserve Bank of Dallas - 2013

Recent empirical work finds that government spending shocks cause aggregate consumption to increase over the business cycle, contrary to the predictions of Neoclassical and New Keynesian models. This paper proposes a mechanism to account for the consumption increase that builds on the framework...

Persistent link: https://www.econbiz.de/10010692372

Globalization and monetary policy: an introduction

Martinez-Garcia, Enrique - Federal Reserve Bank of Dallas - 2008

Greater openness has become an almost universal feature of modern, developed economies. This paper develops a workhorse international model, and explores the role of standard monetary policy rules applied to an open economy. For this purpose, I build a two-country DSGE model with monopolistic...

Persistent link: https://www.econbiz.de/10005367953